On the value of economic self-reliance: The green case for a Brexit

If there’s one thing I struggle to understand, it is how the green party reconciles its decision to support the continued membership of the United Kingdom in the European Union with its emphasis on the need to address climate change. As Baroness Jenny Jones has pointed out as a lone exception to the “green” consensus, British membership is merely going to exacerbate the underlying problems that have become the driving forces behind climate change. For us to successfully address climate change, the idea of free trade as an unequivocal good has to be challenged.

Gail Tverberg and others have noted that the established solutions to climate change do not appear to work. We have seen many ecological problems before, where the issue could be addressed through substitution and technological innovation. Ozone depletion was addressed by an international agreement to phase out CFC’s, addressing the buildup of persistent organic pollutants was similarly agreed upon through international agreements.

In the case of climate change however, things have worked differently. Climate change is a problem that is far more pervasive and intrinsic to the way our economy happens to function. The industrial revolution that led to the drastic rise in our standard of living was made possible by the exploitation of fossil fuels. To maintain our way of life in the absence of the fossil fuels that gave birth to it will be a gargantuan task.

Most efforts to reign in the growth in carbon emissions have so far proved futile. In the presence of free trade agreements, rising manufacturing costs have led to the shift of industry away from Europe, towards countries like China, where energy prices are still low and regulation is very limited. As a result, the decline in emissions in Europe has been more than compensated for by the rise of emissions in China.

As a result of the European Union’s freedom of movement, some efforts by nations to reduce their own carbon emissions have proved nonviable. In Germany, the introduction of an aviation tax led passengers to simply use airports in nations that border Germany. A similar attempt by the Netherlands to introduce an aviation tax similarly led to passengers flying in Germany or Belgium.

In the Netherlands, the decision to raise petrol taxes led to a sharp rise in people who bought their fuel just across the border, leading to an unexpected budget shortfall. You might argue that these were simply foolish policies, but they illustrate an important principle: The current division of power is inefficient. It renders nation states impotent and the likely outcome is thus that the EU will be forced to draw ever more power towards itself.

We live in a globalized world, where every country can freely trade with every other country and where companies will soon be able thanks to TTIP to sue European nations that happen to hurt their interest due to environmental legislation that makes their business model less competitive. As a result, it becomes increasingly difficult for nations to protect the environment. We are stuck in a race to the bottom, where companies will simply shift their energy intensive processes to whatever nation still happens to have cheap fossil fuels.

You might assume that the rise in renewable energy will address these issues. If solar power were to become cheaper than coal, companies would have no more incentive to move their manufacturing base from countries like Denmark and Germany to countries like India and China that still use dirty energy in large amounts. Thus we’d have no reason to challenge free trade agreements.

There are however reasons to be very skeptical of this suggestion. Certain processes appear highly dependent on fossil fuels. Even if we accept the suggestion that renewable electricity will soon be cheaper than fossil fuels (a big if), we have to consider the fact that coal is used not just to generate electricity, but also to manufacture steel as well as a variety of other processes where intense heat is needed. Renewable electricity can compete with fossil fuels because fossil fuels waste most of their heat in the process of generating electricity. When the end-product needed is heat rather than electricity, fossil fuels have a strong competitive advantage.

More importantly perhaps, international trade itself is a process that seems impossible for us to render carbon neutral. There will never be cargo airplanes powered by solar power, as the batteries simply can’t store the massive amounts of energy needed for these planes to lift off the ground. Air transport is instead looking at biofuel to become carbon neutral, which means that we will end up massively increasing our land use if we wish to maintain the growth in air transport.

The transportation of goods by trucks might be physically possible to do with electric vehicles, but it’s difficult to envision this ever becoming economically competitive with trucks that run on diesel. Similarly, we run into trouble when we envision carbon neutral merchant ships. Forty percent of the world’s merchant ships are registered in Liberia, the Marshall islands and Panama, because these nations place few regulatory burdens on the merchants. How are you ever going to enforce a target of zero carbon emissions on such an industry?

This is all nice and well, you might argue, but isn’t our economy reliant upon international free trade by now? This is correct, but the degree to which we will rely on international free trade in the future is a choice we make ourselves. To a large degree, the trade that happens between Britain and other nations is excessive.

Note for example, that Britain imports 61,400 tonnes of poultry meat a year from the Netherlands and exports 33,100 tonnes to the Netherlands. Britain also imports 240,000 tonnes of pork and 125,000 tonnes of lamb while exporting 195,000 tonnes of pork and 102,000 tonnes of lamb.

It’s quite clear that the suspension of trade barriers has lead to the unnecessary and wasteful transport of a variety of goods between different nations. But why does it happen? Even if trade between nations is free, wouldn’t the invisible hand of the free market end up limiting excessive transport to a minimum?

There are a number of issues intrinsic to the European Union that might contribute to this. For example, the VAT system of taxation encourages carousel fraud, where fraudsters earn an estimated 50 billion Euro per year, by exporting products across European borders and receiving VAT back they never paid in the first place. As a result, some products in the EU are transported across borders for the sole purpose of tax fraud.

Similarly, to protect certain long established industries, the EU only allows certain regions to use particular terms for their food products. The EU only allows cheese to be called Feta cheese if it happens to be produced in Greece, while Parmesan cheese has to be produced in the region of Parma.

As a result of this, the main way for food producers to earn money becomes to produce a product with a protected status, as you don’t face competition from outsiders who might be able to produce the product too. The limited number of producers restricted to a particular geographical region also enables the creation of economic cartels that keep prices artificially high.

There are of course arguments to be made in favor of this policy, but in practice the combination of free trade between European nations and the regional protection of food items, leads to the excessive shipping of products across nations that could just as easily be produced domestically.

We can choose to grow more dependent on the import of products from foreign nations, or we can attempt to maintain the natural economic barriers that existed for centuries before we became dependent upon fossil fuels. This would also have the effect of rendering us less vulnerable, should international trade happen to break down for whatever possible reason.

It’s not hard to envision how the consequences of free trade and increased reliance upon foreign nations could come back to haunt us. Saudi Arabia, the world’s second largest oil producer, is a politically unstable nation. It’s bordered by two nations that have large swathes of territory governed by Al Qaeda and Islamic State and also happens to have a domestic religious minority of Shia Muslims, who happen to live on top of most of the oil fields. If Saudi Arabia ever goes the same way as Venezuela or Libya did, it’s easy to see that there would be international consequences.

Similarly, the Suez Canal lies next to territory home to terrorist groups that have successfully taken down airplanes. At some places the canal is a mere 300 meters wide, so it’s not hard to see how domestic instability could shut off the canal, causing enormous global disruptions in the free exchange of goods.

The more complex a system becomes, the more potential points of failures emerge. Free international trade has turned into an immensely complex system, host to a variety of factors that could lead to cascading failures, many of which are difficult for us to anticipate.

An exit from the European Union today would provide Britain with the opportunity to reduce its economic reliance on other nations. If an exit does not occur this year, there probably won’t be another opportunity for many years to come. In the meantime, the global economy and the European Economic Area would grow increasingly interconnected, ensuring that if the United Kingdom were to leave in the future, the economic consequences would be much bigger.

To me it is clear that the best solution is for the United Kingdom to make use of this once in a lifetime opportunity to leave the European Union. Leaving the European Union would help prepare Britain for the inevitable era of economic contraction that is ahead when the global economy runs into finite limits. The limited resources we have on our planet would be used in a less wasteful and more efficient manner again.

Perhaps most important of all however, Britain’s political borders were shaped by the geographical boundaries that an island has. Boundaries exist in nature for a reason, they contribute to diversity and create isolated communities that can survive even as other communities are in turmoil. This phenomenon occurs at every level, from the appendix that hosts bacteria that recolonize the intestinal tract after disruption, to islands like Socotra where species survive that have gone extinct everywhere else.

Nature never puts all of its eggs in one basket, nor should we. As we all know today, Britain’s isolation ultimately proved to be to everyone’s benefit when previous utopian experiments imploded and Britain was able to help reestablish order on the mainland of Europe.